Essay About Income Tax And Zakat Payment

Essay
Taxes is consider to be 50-60 percent of the federal government’s money (Allie Conti, 2016). If no one filed his or her income tax, that would cause a huge increase in tax evasion and less money for the federal government (Allie Conti, 2016). This particular situation will require the government to borrow more money and the spending would be less. Countries that have zero personal income tax can have its positive and negative outcome. The tax system is mainly bases on financial accounting and reporting, which should be based on Saudi Generally Accepted Accounting Principles standards issued by the Saudi Organization of Certified Public Accountants. Saudi Arabia takes third place in the global list of countries ranked by ease of paying taxes, a remarkable achievement for a G-20 country with GDP of over $700bn (“Tax system and tax regulations,” 2015). Tax regulations in Saudi Arabia are fairly brief and their provisions are relatively clear in respect to items that they deal with directly. Saudi Arabia operates two parallel tax systems. Different tax laws regimes apply to companies owned by Saudi/GCC nationals and to the rest: residents companies owned by Saudi/GCC nationals are subject to zakat payment, all other firms pay corporate income tax (“Tax system and tax regulations,” 2015). Zakat, which is a religious tithing of sorts and alms for the poor approximately give 2.5% of 15% of your profits each year to the less fortunate (“Taxes in Saudi Arabia”, 2009). Many Muslims choose to give their Zakat directly onto the hands of someone they see in need. Other people give directly to the Department of Zakat. This department ensures that the Zakat funds it receives are distributed accordingly. The choice of tax system depends only on taxpayer’s ownership structure. Mixed companies jointly owned by Saudi/GCC and foreign individuals/entities are subject to both zakat and corporate income tax, applied to the respective shares of shareholders in the business. The zakat regulation was approved by the Shura Council June 2014(“Tax system and tax regulations,” 2015).  It includes certain changes to the basis of zakat computation as compared to the current practice. Zakat base computation will be shifted from its current focus on equity and long-term assets/liabilities to a working capital basis Zakat payers will be allowed to pay up to 20% of their annual zakat liabilities to registered charitable institutions and societies are authorized to receive zakat. A delay penalty of between $26.65 and $6662.50 per year is propose to be imposed for not filing zakat on time. Under the Tax Law the following people are defined as subject to tax in KSA: a resident capital company in respect of the shares of non-KSA/GCC nationals; a resident non-GCC individual who conducts business in KSA; a non-resident who conducts business in KSA through permanent establishment and a non-resident with other taxable income from sources within the KSA. Foreign companies that have created a permanent establishment in KSA are subject to corporate income tax via self-assessment in a manner similar to Saudi companies; foreign companies that earn income from Saudi sources without creating a permanent establishment are subject to tax by way of withholding.